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Deriving value or risk? Determinants and the impact of emerging market banks’ derivative usage

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  • Jad Bazih

    (ESC [Rennes] - ESC Rennes School of Business)

  • Dieter Vanwalleghem

    (ESC [Rennes] - ESC Rennes School of Business)

Abstract

This paper examines the determinants of the emerging market banks' derivative usage and the impact of derivative usage on bank value, total risk and bank stability. Our empirical evidence first suggests that derivative usage is driven primarily by net interest margin, bank concentration and institutional strength. In addition, although derivative usage appears to reduce emerging market bank value, it does not affect total risk. Moreover, emerging market banks can reduce bank instability using derivatives. Our findings have important implications for investors and policy makers focusing on emerging derivatives markets.

Suggested Citation

  • Jad Bazih & Dieter Vanwalleghem, 2021. "Deriving value or risk? Determinants and the impact of emerging market banks’ derivative usage," Post-Print hal-03329217, HAL.
    • Handle: RePEc:hal:journl:hal-03329217
    DOI: 10.1016/j.ribaf.2020.101379
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-03329217
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    Keywords

    Banks; Derivatives; Emerging markets;
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